Share with your friends










Submit

Analytics Magazine

Inside Story: Mothers of Invention

March/April 2010

CLICK HERE TO GO TO THE DIGITAL VERSION OF THIS ARTICLE

If necessity is the mother of invention, then deregulation is the father, and revenue management is the couple’s golden child, at least as far as the airline industry is concerned.

The Airline Deregulation Act of 1978 spawned a host of low-fare carriers that could make money while selling seats at a fraction of the price charged by established airlines. That gave the upstarts a huge advantage.

The big carriers, locked into hefty labor and legacy costs, had no clear way of leveling the playing field. Their sheer size became a liability. All major airlines faced a troubling question: How can we compete? If we lower fares across the board, it doesn’t matter if we have a 100-percent load factor — we’ll still lose money. And if we don’t match the upstart airlines’ fares, we’ll lose market share, and eventually we’ll be out of business.

American Airlines solved the dilemma by offering different fare classes in each market. American matched the low-fare airlines’ prices with a portion of its seat inventory on certain routes and saved another portion for late-arriving, high-yielding demand (typically business travelers).

Thus was born the concept of revenue management, but several questions remained: How many seats do you sell at a discount and how many do you hold in reserve? When and by how much do you change the price of each bucket of inventory? Again, analysts and their tools of the trade — forecasting, optimization, etc. — came up with the answers.

Virtually every airline in the world adopted some sort of RM system, and the concept inevitably spread to many other industries (hotel, cruise, etc.) where you find perishable, limited capacity. Alas, RM couldn’t solve every corporation’s problems. Many airlines still went out of business, crushed by some combination of high legacy costs, soaring fuel prices, post-9/11 paranoia, the recession and good, old-fashioned corporate mismanagement.

Today, the purveyors and managers of RM systems face a whole new threat: the Internet and the tech-savvy customers it spawns as outlined in our cover story.

— Peter Horner, Editor
horner@lionhrtpub.com

CLICK HERE TO GO TO THE DIGITAL VERSION OF THIS ARTICLE

Analytics Blog

Electoral College put to the math test


With the campaign two months behind us and the inauguration of Donald Trump two days away, isn’t it time to put the 2016 U.S. presidential election to bed and focus on issues that have yet to be decided? Of course not.

Headlines

Stereotypes hold back girls’ interest in STEM subjects

New research from Accenture reveals that young people in the United Kingdom and Ireland are most likely to associate a career in science and technology with “doing research” (52 percent), “working in a laboratory” (47 percent) and “wearing a white coat” (33 percent). The study found that girls are more likely to make these stereotypical associations than boys. Read more →

Gartner: Connected ‘things’ will jump 31 percent in 2017

Gartner, Inc. forecasts that 8.4 billion connected things will be in use worldwide in 2017, up 31 percent from 2016, and will reach 20.4 billion by 2020. Total spending on endpoints and services will reach almost $2 trillion in 2017. Regionally, China, North America and Western Europe are driving the use of connected things, and the three regions together will represent 67 percent of the overall Internet of Things (IoT) installed base in 2017. Read more →

U.S. News: Analytics jobs rank among the best

When it comes to the best business jobs, analytics- and operations research-oriented disciplines dominate the list, according to U.S. News & World Report’s rankings of the “2017 Best Jobs.” In order, the top five “best business jobs” listings include: 1. statistician
, 2. mathematician
, 3. financial advisor, 
4. actuary, and 
5. operations research analyst. Read more →

UPCOMING ANALYTICS EVENTS

INFORMS-SPONSORED EVENTS

CONFERENCES

2017 INFORMS Business Analytics Conference
April 2-4, 2017, Las Vegas

2017 INFORMS Healthcare Conference
July 26-28, 2017, Rotterdam, the Netherlands

CAP® EXAM SCHEDULE

CAP® Exam computer-based testing sites are available in 700 locations worldwide. Take the exam close to home and on your schedule:


 
For more information, go to 
https://www.certifiedanalytics.org.